A change of tone: is Nokia the next turnaround stock?

Nokia has been through some very tough times in 2012 catastrophically losing market share and quickly giving away its leading positions in smartphones. But after a nearly $3 billion loss and massive layoffs in 2012, the company is finally starting to emerge stronger and healthier in 2013.

The last quarter of 2012 finally brought the company to profitability but was not enough to make up for the huge losses in earlier quarters and the company ended the year deep in the red. And while we expect a bumpy start of 2013, the company has finally got its cards stacked to its favor.

Moreover, with its shares relatively low and 2013 being truly a make or break year, Nokia is both a risk and a huge investment opportunity.

The ‘top-down’ strategy and Nokia’s monopoly on color

To understand Nokia’s strategy, we need to look no further than its very consistent CEO, ex-Microsoft’s Stephen Elop. We can argue all day he hugely mishandled the transitional period for Nokia, making it extra hard, but for better or worse, that’s all over now.

The Nokia chief executive does not shy away from explaining Nokia’s ‘top-down’ device strategy. The company is first releasing an advanced flagship phone like the Lumia 920, a high-margin device, which then sets the tone for Nokia’s more affordable devices. Most tech companies have the same strategy and Samsung is a glaring example releasing affordable Galaxy S III look-alikes all throughout 2012.

Nokia however employs a richer design allowing much more versatility. Interchangeable covers, different, colorful models, glossy and mat designs, variety. That tone is clearly distinct on today’s market - colorful devices with great design that appeals to a huge number of people. And that could turn out to be to Nokia’s great advantage. The company might not have a patent for color, but it certainly holds the monopoly on it in the phone space right now.

Closing the gaps: Nokia Lumia 720 and Lumia 520

The company has said it itself when it announced the adoption of Windows Phone in February 2011 -- it was about to take two years to fully transition. Good news is, Nokia is right on time. We can tell by two important recently launched devices - the Lumia 520 and the Lumia 720.

Nokia now not only has all price tiers covered, it is covering them with uniquely designed no-compromise devices. The Lumia 520 hits the lowest price points and looks very competitive with its large-for-the-class 4.0-inch screen and 512MB of RAM that translate into support for all mainstream apps including Skype.

The Lumia 720 is the company’s heavy mid-range hitter emphasizing on a brilliant camera in an affordable device. It also supports wireless charging (as far as we know, it is the only mid-range device to do so) via additional covers. It’s got a vivid 4.3-inch display which we tend to think is the close to being the perfect size for single-handed use, a microSD card and a thin profile.

What’s next

So right now, Nokia’s lineup looks very solid, covering all price tiers with unique devices. However, it is the near future that holds a lot of excitement for Nokia.

We have heard from various sources and we have no reason to doubt it: the killer cameraphone is coming and it will be made by Nokia. Codenamed Nokia EOS this yet unconfirmed mysterious device aims to bring an 808-grade camera to Windows Phone. And by 808-grade we mean a much bigger than standard sensor and great quality optics. If we go full-on with speculations, we would hope (guess) to see it around May when rumors say the next big Windows Phone update, GDR2 will get released. The device is said to be coming exclusively to AT&T in the United States.

Then we have the rumored Nokia Laser, a Lumia 920 variation, coming exclusively to Verizon. This handset is expected to get a huge marketing push by Microsoft, and having it on the nation’s largest carrier is definitely an important milestone.

Finally, we have the Nokia Catwalk rumor. That device is expected to first land on T-Mobile and it is said to be a hugely important launch. The reason? It will kick off a new design cadence for Nokia. After nearly two years of colorful plastic, Nokia will adopt a new square-edged aluminum design language that we expect to quickly start spreading to more affordable devices. We can only hope Nokia keeps its attention to color there too.

Carrier exclusivity: the wrong strategy?

Finally, we have to admit Nokia’s hard work to fill all the gaps in its portfolio, but we still cannot fully comprehend Nokia’s weird approach to markets. Right now, Nokia has chosen to sell its flagship devices exclusively on a single U.S. carrier. For the Lumia 920 it is AT&T.

That seems to go against all sound logic. Apple was the only company we can remember in the recent past selling its iPhone exclusively to AT&T, and it was because of limitations. As soon as Apple could (and the carriers agreed), it started selling its iPhone on Verizon and Sprint (soon on T-Mobile). That has been a huge boost for iPhone sales, as right now, with Verizon and Sprint, overall U.S. iPhone sales nearly double in volume.

Why is Nokia arbitrarily deciding to limit its flagship device presence on a single U.S. carrier is beyond our understanding, but we hope this changes soon.

Windows Phone: a stumbling block or the cornerstone?

With all that, Microsoft should be definitely happy to have such a devoted and exclusive partner like Nokia. But can the same thing be said about Nokia? Not so much. Microsoft might be pouring $250 million cash injections to help alleviate the pains from the transition to Windows Phone for Nokia, but it’d better look in its own back-yard. It’s time to call it out. After nearly two and a half years since it first launched Windows Phone lacks not just the apps - it lacks a versatile notification system and customization options.

Live Tiles can only go so far when you have to scroll through an endless list of apps with not even a grid display option to make your life easier.

Let’s make it clear - Windows Phone has got suave transitions, a consistent user experience and some very healthy requirements like a mandatory camera shutter key, but it needs to step notifications and customization up a lot.

We will not sing the app mantra again, but it’s worth once again pointing out that Microsoft definitely needs to work tirelessly with developers to cover the basics. We are still waiting for our Dropbox native application for Windows Phone, and games like Real Racing 3 would really help convince consumer into buying devices.

Conclusion

Despite the difficulties ahead, Nokia is about to soon fully conclude its transition to Windows Phone. It won’t show immediately, but we expect Nokia to present itself to customers with a full portfolio of Windows Phone devices around Q2 2013 and start steadily growing its Windows Phone sales from around Q2/Q3 2013.

Interest in Nokia’s stock is high right now, but if that growth materializes, we wouldn’t be surprised to see investors jumping back on the previously deserted Nokia stock. And with optimistic investors the stock has a huge growth potential.

Should you rush to buy Nokia stock right now? We can only say that its latest devices spur a lot of optimism. And that’s plenty of food for thought, isn’t it?

the real nokia that people know is the best in hardware and software and will not use other's software!!

WP is not nokia's .... symbian and meego/maemo is!

do you know that WP plan isnt working as plan? it is already 2 years after transition yet they are still down...and still symbian has a respectable 5-6% market share even they announce 2 years ago that they will kill symbian... WP is still at 2%!! and i think 2 years is enough for WP to have 10% share...

the only thing that make me hate nokia the most is that why kill symbian and meego?! i understand killing meego because it has no ecosystem but its not acceptable just to end it then and there!! look at what BB10 achieve, 70,000 apps at release, nokia just need to support its platform and devs! a lot reviewed N9 as the next big thing! but what did they do, MSFT and NOK partnership!

while symbian, they should continue it!! they cant compete with android on low end if they use s40! only symbian that is comparable to android in terms of customization... WP and iOS dont have that... and symbian dont require high end specs thats why it is suited to be a low end OS!

Agreed Victor. The carrier exclusivity is total BS. The challenge for them is to get Symbian users to the Lumia line (not going to happen unless MSFT work hard enough to make WP capable enough for Nokia's hardware innovations and bridge the missing feature gap between Symbian and WP), though I personally feel this may be the year in which it happens. Also, the new "we focus on US market, while we feel other strongholds like Philippines, India, MEA can lick our boots" is totally wrong. Not going to deny that the US is a very very important market, but I think I concur with Jolla's strategy on working on China, Finland and other emerging markets and then then going to the US one. The new Lumia's are awesome though I feel there should have been 3 devices instead of 5, the cross between 620/520 & 720/820 and the 920.

Carrier exclusivity as a strategy has to be the stupidest strategy imaginable. You basically give the middle-fingered wave to ~75% of cellular subscribers so that you can maybe get what, 3% market penetration in the carrier you have the exclusive with? Nokia isn't going to get many iSubscribers to switch. Same for Android.

The management team at RIM/BB should pray that Nokia keeps the carrier exclusive strategy in place. That is the only thing keeping them viable.

Alright couple things Victor doesn't seem to understand. For my little supprise here, this time this doesnt sound too much of anti-Nokia article.

Carrier exlusivity: wrong strategy?
- totally good and fine strategy. In USA it is important that carrier, is promoting the device, that is as a "hero" device. At time others were not ready for it. ATT was and it was good choice for both partners. Verizon for example got what it needed to join in as well. Knowledge about market demand.

For Nokia it was also good choice. We all know that Nokia has difficulties to supply enough devices for ATT alone + the rest of the world. If all other carriers would have been in, situation would have been even worse. Exlusivity is good thingvfor Nokia. If carrier puts fair amount of cash in, it guarantees that they also want to sell a lot.

"Live Tiles can only go so far when you have to scroll through an endless list of apps with not even a grid display option to make your life easier"

- Typical comment from a guy who never even bothered to use WP. First of all, app list only contains apps, not games. There is nice and easy way to find everything from that "endless list". For example youvwant to use wikipedia app, just hit "W" in list and it junps directly to apps that begins with w. Much easier than in android or ios.

- No apps?? Camoon there is 130000 already and all of them are quality ones. There is no n+1 copy of the same pp. How many the one need?

I was a nokia adict.
Got nokia since Nokia 3300
Then starting to use / upgrade to any symbian phone nokia throw at me starting with the 7650, 3650, 6600, 7610, ..... N8.

When nokia introduce the N9, I also bought it.
When nokia introduce the Lumia 800, I also bought it.

Because I love nokia so much, I use lumia 800 for almost 8 months. and my experience with LIVE TILES is BAD. LIVE TILES really uncool. It's a placebo. It's only looks cool for 1-2 minute, after that BOORRRINGG.. 130000 apps? Really??? The free apps is VERY LOW QUALITY compared to android/iphone counterpart. Out of 130K apps, maybe only 5000 apps that were in Android/iphone app standard.

BTW, sold the Lumia 800, really hate it, BUT I LOVE THE NOKIA N9 even though it doesn't well supported. I think nokia/elop were doing a BIG mistake.

Nokia have choosen Windows then forgotten about its Loyal Symbian users,as Windows is to Restricted for those people,the look of Windows phones is so horrible with the Tiles,with Symbian phones you had loads of Themes so you could customize how your phone looks,Why No Radio or Bluetooth Sending An Recieving is also bad,then having to use Zune is totally wrong,so Mr Elop an Microsoft have really got change how Windows Preforms before the Symbian users give it a Try,but with more Android phones that Preform the same as Symbian its really going to be hard to get those people back,so glad i left Nokia after the N8 for the Samsung Galaxy S2 an S3 an with S4 on the way its going to hard battle now for Nokia

Maybe u should do a little research bluethooth file transfer works fine i hav transfered pics songs through it even from feature phones.

Zune is no longer used by WP8 phones u just hav to mount it by USB cable and it becomes mass storage.

At the same time WP has go along way it needs a file explorer and many apps tht r still missin as for me i can no longer deal with phones with s**tty build quality and unreliable performance which dont deserve $650 price tag

the problem with windows phone 8 is not nokia but microsoft.... they want this walled garden experience.... it is not bad but it is not for power users....

being an 920 owner i have got to say that 70% of all smartphone users and 100% of iphone users who have not jailbroken their phone would love this phone

for the very small percentage of power users/ people who enjoy have backtrack5 on their phone/ some things are missing like: file manager, mkv support, better connectivity on non windows7/8 computers... (whats up with that?)

i'm still amazed how you can delete in seconds what it took a couple of minutes to copy...

While Nokia is doing good job, there is one major reason why they may not be able to succeed. It is MS. They are just not putting enough efforts behind the WP OS. I think the problem is way up on the chain with people like Terry Myerson (Head of WP) who is a typical MS old school and refuses to change with changing market.

WP is a good OS and I personally love it, but it is broken and missing a few big and many small features/enhancements that individually may not be significant, but all together can make a huge difference in one's perception about it.

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